Haemonetics(HAE)2024-11-09 06:34Financial Data and Key Metrics - Q2 revenue was $346 million, a 9% reported growth and 4% organic growth, primarily driven by the hospital business [7] - Year-to-date revenue growth was 8% reported and 3% organic [7] - Q2 adjusted EPS was $1.12, a 13% increase YoY [7] - Adjusted gross margin reached 56.7%, up 270 basis points YoY, with 70% of the improvement driven by volume and mix [30] - Adjusted operating income was $83.5 million, up $15 million, reflecting a 310 basis point sequential expansion [33] - Adjusted net income was $57.3 million, up $7 million or 13% YoY [36] - Free cash flow was $20.4 million, compared to $84.8 million in fiscal 2024 [41] Business Unit Performance - Plasma revenue declined 3% in Q2 and year-to-date, primarily due to CSL's planned transition [10] - Software revenue was flat in Q2 but grew 10% year-to-date, driven by NexLynk DMS upgrades [11] - Hospital revenue grew 31% reported and 16% organic in Q2, driven by Blood Management Technologies and TEG growth [17][18] - Interventional Technologies grew 61% in Q2 and 64% year-to-date, driven by the successful launch of VASCADE MVP XL [20][21] - Newly acquired products contributed $16 million in Q2 and $34 million year-to-date [23] Market Performance - North America disposables revenue declined 3% in Q2, primarily due to CSL's transition [10] - Europe showed strong collections momentum, with recent volume pressures considered transitory [11] - China faced market challenges, particularly in TEG 5000 pricing, contributing to a 5% corporate revenue share [75] Strategic Direction and Industry Competition - The company is upgrading its NexSys platform and accelerating technology upgrades across U.S. centers, expecting completion this fiscal year [12] - The company is gaining market share in plasma collection and converting competitors' centers with its enhanced NexSys platform [13] - The company is expanding its presence in the rapidly growing pulsed field ablation market with VASCADE MVP XL [21] - The company is focusing on expanding its market share in electrophysiology and building a foundation in interventional cardiology and structural heart [25] Management Commentary on Operating Environment and Future Outlook - The company reaffirmed its total revenue growth expectation for fiscal 2025 in the range of 5% to 8% and raised organic growth guidance to 1% to 4% [9] - The company expects a return to more rapid plasma collections in the near to intermediate term, driven by strong end-market demand for Ig therapies [14] - The company raised its organic revenue growth guidance for the Hospital business to 14% to 17% [26] - The company remains confident in achieving short- and long-term goals, navigating complex market challenges, and adapting to emerging trends [28] Other Important Information - The company entered into an accelerated share repurchase agreement to buy back $75 million of common stock [39] - The company has $150 million remaining under its existing share repurchase authorization [40] - The company expects working capital to improve in the second half of the year and reaffirmed its free cash flow guidance for fiscal 2025 at $130 million to $180 million [43] Q&A Session Summary Question: Adoption and pricing dynamics of VASCADE MVP XL - VASCADE MVP XL has been introduced in nearly half of the existing accounts, with strong feedback on ease of use and functionality [53] - The company expects high 20% growth in the second half of the year, driven by continued penetration and pricing reflecting the value proposition [54][55] Question: Plasma business dynamics excluding CSL - Excluding CSL, the plasma business grew on pricing, driven by technology upgrades, despite a mild pullback in volumes [57][58] Question: Adjusted operating margin and cost-cutting - The company expects flattish operating margins in Q3, with a bump in Q4, driven by mix improvements and investments in clinical teams [64][65] Question: Acquired products in the Hospital segment - The company remains bullish on acquired products, with slower-than-expected progress due to market dynamics, particularly in PFA [67][68] Question: TEG market performance - TEG growth was strong in the U.S. and Europe, driven by the heparinase neutralization cartridge, while China faced pricing challenges [74][75] Question: VASCADE growth trajectory - The company expects continued accelerated growth for VASCADE, driven by market penetration and international expansion [87][88] Question: Blood Center margin stability - The company is focusing on margin expansion in the Blood Center business, particularly in the plasma collections segment [91][92] Question: Clinical investments and OpSens rollout - The company is making clinical investments to support growth, particularly in the OpSens and VASCADE product lines [97][98] Question: International launch of VASCADE - The company is ahead of schedule in Japan and building momentum in Europe, with international expansion being a key growth driver [102][103] Question: Plasma share gains - The company expects to gain momentum in plasma share gains moving into FY 2026, driven by technology upgrades [105][106] Question: VASCADE MVP XL labeling expansion - The company is working on expanding the label for VASCADE MVP XL, with FDA support expected [110][112] Question: Currency impact on margins - Currency is expected to remain a headwind in the second half of the year, depending on prevailing rates [113] Question: CSL contribution - CSL is expected to contribute approximately $100 million in fiscal 2025, with 70% already realized in the first half [114] Question: M&A strategy - The company's immediate priority is delivering on recent acquisitions, with a focus on tuck-in acquisitions and opportunistic share buybacks [117][118]